Part A (1): McDonalds and Customer Relations
The McDonalds Corporation is the world’s largest company in the field of hamburger fast food. The corporation started in the USA in 1940 has grown to a global presence of over 119 countries. Its customer base is 70 million daily. McDonalds started as a restaurant selling barbecues. In 1955, business mogul Ray Kroc joined the restaurant as a franchises agent. He acquired the restaurant and employed a production line marketing concept to grow it to its current global presence. McDonalds’ development has come from realising franchisees and affiliates to run it. The corporation runs only 15% of its operations. This ownership model allows for versatility in marketing. McDonalds employs different franchise models in different regions. The company made a profit of $5.7 billion in 2012 and revenue of $28 billion (Baines, Fill & Page 2008). The corporation’s global presence has led economists to coin the world “McDonaldinazation” in reference to its widespread global presence. In the USA alone, one in every eight employees has worked for McDonalds at one point in time (Thomas & Earl 1995).
The company under consideration sells different products to its global customers. The predominant products are hamburgers and chicken sandwiches in addition to soft drinks, salads, and French fries. Other products include breakfast foods and vegetarian food items. The company allows local franchise to incorporate local tastes and flavours. In Asia, for instance, McDonald’s franchisees are selling soup. In Germany, they trade in sell beer while those in New Zealand deal in meat pies. This diversity has allowed the company to expand to over 35,000 restaurants globally.
It should also be mentioned that McDonalds employs several marketing strategies. Through advertisements, the company creates awareness about its products. Its billboards are common in Europe and America together to its TV and radio advertisements to market the products. The company has devised many slogans for its brands. The McDonald Corporation has established and retained long-term relationships with its customers. This has been the main driver of its growth to the status of the world’s largest hamburger fast food restaurant.
A good relationship with customers is vital for growth of any corporation. McDonalds enjoys a cordial relationship with customers and franchisees (Jones and Sasser 1995). Establishing long-term relationships with clients builds loyalty and sustains growth. A corporation as old as McDonald has systems that guide its relationship with clientele. These systems guide the relationship towards achieving the corporation’s goals and objectives. In the recent times, McDonalds has launched a smart phone application through which it could interact with customers. However, such long-term relationship has disadvantages like building unrealistic expectations among customers, who may sometimes exploit this relationship to make demands that may hurt an organisation. This section will analyse in details how McDonalds has built long-term relationship with its clients and how these relationships have helped the corporation achieve its objectives. The section will also explore some of the challenges that long-term relationships with customers present to McDonalds.
Corporations relate with their customers through many platforms. The most popular one is customer relationship management programmes (Ballantyne, Christopher & Payne 2003). This platform aims at making sales and marketing easier by retaining customers’ loyalty. McDonalds has integrated customer relationship management programmes that bridge the gap between the changing customers’ needs and the corporations’ objectives. Since its inception, the company has kept in touch with its clientele needs and hence consolidated its leadership in local and global market. McDonalds has adopted an electronic customer relationship management programme that enables it to get feedback from customers, who can download the programme developed by Mowingo on their smart phones. The programme allows McDonalds to keep in touch with changing customers’ needs.
Long-term relationship with customers portends several benefits to corporations. For McDonalds, the relationship enhances effective management of resources. Companies invest a lot of resources in market research, thus McDonalds is able to reduce these costs by having platforms for sharing key information with customers (Harker & Egan 2006). The company has employed technology to interact with consumers, further reducing the strain on schedules and resources. The use of smart phone applications means that the corporation can communicate with customers in a convenient manner that the latter find easy and effective. This provides useful data that market research would not have obtained. In the USA, for instance, McDonalds restaurants are using data from the smart phone application to create personalised offers and loyalty rewards to customers.
Another benefit of long-term relationship with customers is the harmonisation of the process. Big corporations like McDonalds have complex systems that work together to achieve specific and overall objectives. These systems must work in synch to ensure that there is minimum confusion and less overlap of roles. A long-term relationship with the clientele guarantees that there is speed and quality in the delivery of services. Because of a long-term relationship, customers understand the corporation’s values and procedures, that appreciates customers’ uniqueness and develops systems that make all feel as if they are part of the family (Lagrosen & Lagrosen 2003). Customers will thus spend little time ordering because they know the norms and ethos.
The long-term relationship with consumers leads to excellent communication, which inspires confidence and brings about loyalty. If the relationship between the customers and the company is short-term and capricious, the chances of timely and honest communication are low (Harker & Egan 2006). Conversely, long-term relationships create systems for multi-level communication that gives customers the confidence to interact on different levels of management freely without fear. It inculcates a culture in which customers criticise constructively without creating unnecessary publicity stunts and legal suits.
It is worth noting that long-term relationships with clients have some disadvantages. First of all, customer relationship programmes are expensive. Creating a database of loyal returned customers and rewarding them accordingly requires substantial resources. Loyalty rewards do not always pay off as customers may still move on if prices elsewhere are cheaper (Lagrosen & Lagrosen 2003). Additionally, long-term relationships do not augur well with younger and adventurous customers. Fast foods appeal more to the younger generation rather than the old. Besides, the younger ones want to experiment and a long-term relationship between them and a company is difficult to maintain. McDonalds may therefore invest plenty of resources in long-term relationship that may not even pay back.
McDonalds employs a multi-dimensional approach in customers’ management. Similarly, different factors influence the choice of one customer management tool over the other. Narayandas (2005) argues that customer management programmes “provide employees with the information that they need to know their customers’ wants and needs, and build relationships between the company and its customers” (p.8). So, McDonalds is responsible for only 15% of its operations, leaving 85% to franchises and affiliates. However, the corporations, just like other franchisors, support its franchisees in marketing and customer management.
In the United States, most McDonalds’ franchises use smart phone applications to manage customer relationship management. As mentioned before, more than 6,000 McDonald restaurants use a downloadable application to establish customers’ frequency to the company’s premises. Customers can also give feedback about their levels of satisfaction using the application. The best way to reach and interact with customers is through platforms that are customer-driven. A phone application allows customers to rate services without the fear of judgment. It also lets companies have access to objectives and actionable data. Through the application, the firms can keep up with the changing needs of their customers. The digital interaction allows for establishment of cordial and mutually beneficial relationship between McDonalds and its clientele.
More than 30 million customers in the USA frequent McDonald restaurants daily. This large number necessitates a robust and reliable programme to manage customers’ relationships. McDonalds has therefore contracted Astute Solutions’ Power Center to manage communication channels with the consumers (Thomas & Earl 1995). The data solution vendor allows McDonald to increase data capture, which is vital to show levels of customer satisfaction. McDonalds’ franchisees all over the world can access this data and get a deeper understanding of how to manage customers. Astute Solutions’ Power Center integrates McDonald’s customer data and provides a reliable tool for managing customers’ relationship. Additionally, the robust data ensures measurable and actionable data to affiliates, franchises and franchisors to consolidate leadership in the market by having a better understanding of the customers’ needs.
McDonalds operates like any other franchisor, allowing its affiliates and franchisees to establish and develop interaction with customers provided the general guidelines are met. All franchisees have access to the corporation’s central data (Payne & Frow 2005). Moreover, McDonalds allows affiliates to manage their relationship with customers in order to take care of cultural differences. In South America, for instance, the number of people with smart phones is lower than that in the USA. Digital management of information through smart phones applications may not work. Rather, franchisees in such regions manage customers’ relationships through manual records.
Only 5% of McDonalds’ customers give their feedback to customer service representatives, 45% directly complain to branch representatives, and the other 50% never complain (Mouzas, Henneberg & Naude 2007, p.1020). These statistics are useful in guiding McDonalds’ customer relationship. The first step to improving it is employees’ training. McDonalds should focus on equipping its employees with tools and resources to manage customer relationship. When employees are well trained, they are capable of recognising when a customer has a complaint and how to diffuse it. This training should be extended to all employees so that there are no lapses in customers’ management.
McDonalds can also improve customer management by establishing regional links and embracing technology. The company should make use of its regional teams to enhance collaboration and adoption of best practices. Regional collaboration will ensure that McDonalds compares data and notes, and assists in identifying areas that the company should improve. The company should also use appropriate technology for different regions. In 2000, it launched the frequently asked question (FAQ) section on its web site. No doubt, the clientele was enthusiastic about it but it is highly unlikely that the move will stand the onslaught of superior technology. The use of smart phone applications is a great move but it should be extended to other regions.
PART A (2): Stakeholders and Customer Relationship
To realise a mutually beneficial and effective customer relationship, all stakeholders in an organisation must work together. Each stakeholder, from the top management, employees and subordinate staff, as well as customers have a role to play in making customer relationship management successful.
CRM envisages several outcomes within an organisation. The first set of outcomes is at the developmental stage, when there must be a change in schedule, cost and quality. At the operational stage, CRM presupposes an improvement in service delivery, higher satisfaction for customers, cost effectiveness, superior management of data and meeting all set targets. McDonalds has implemented CRM with varying degree of success. However, more needs to be done.
Within the organisational context, Thomas and Earl (1995) identify “knowledge management capabilities, willingness to share data, willingness to change processes, and technological readiness” as the areas that require concerted efforts from all stakeholder (p.11). The top management of a company supports implementation of the CRM through project organisation. The management, i.e. stakeholders, must communicate the CRM strategy to other stakeholders in a clear and concise manner. It must also inspire culture and process change within the company. Similarly, the management is responsible for what Mouzas, Henneberg and Naude (2007) refer to as “system integration capability” (p.1021). Subordinate employees and support staff are responsible for operationalising the CRM to deliver desired changes.
The fast food industry is among the most competitive ones. As such, competitors make excellent customer relationship management a fundamental aspect for McDonalds. The employees, as stakeholders at McDonalds, have contributed to the success in the customer service. Thomas and Earl (1995) state that “courtesy, genuine concern and diligent services towards customers” are common attributes in the company (p.13). Cashiers exude a pleasant mien to customers. Workers operating behind the scenes are diligent to ensure that the need for quick services does not compromise the set standards. Operation managers assist when necessary to guarantee that customers leave McDonalds happy and satisfied. All the systems work together to realise customers’ satisfaction.
The top management in McDonalds offers the necessary support for customer relationship management having a track record in embracing innovation. In 2000, the management allowed the use of the FAQ section in the company’s web site to enhance feedback from customers. Later, it contracted Astute Solutions’ Power Center to create a central database for McDonalds’ customers. From this database, franchisees and affiliates can access information and use it to improve their services to customers. Additionally, the management of McDonalds has approved the use of smart phones applications to solicit for customers’ feedback. Digital platforms have increased the consumers’ feedback by 60 % (Payne and Frow 2005). This would not have been possible if all stakeholders in McDonalds did not play their part developing and sustaining CRM.
PART B: Loyalty Progrmmes and their Effectiveness
Loyalty programmes are marketing tools that seek to reward loyal customers. The programmes’ aim is to make clients more loyal and benefit the company in the long run. McDonalds employs different loyal programmes to reward the customers who frequently shop at the restaurants. In addition, the programmes are rolled out at different levels initiated and sustained by McDonalds and its affiliates and franchisees. Attracting and retaining customers has become difficult for fast food restaurants especially with the increasing sensitisation on health risks of fast foods. Additionally, competition from other established and new brands is making the acquisition of customers difficult. With the advancement in technology, companies have no option but to adopt programmes that reach out to as many customers as possible.
It should be stated that McDonalds is among the first fast food restaurants to introduce loyalty programmes to its clientele. It has also become the first one to use electronic loyalty programmes targeting young customers. McDonalds has partnered with Front Flip LLC, which is a mobile marketing organisation located in the USA, to launch an electronic loyalty programme (Payne & Frow 2005). The partnership to reward loyal customers covers 600 McDonalds restaurants in America. The programme also exploits the growing popularity of bar codes in advertising. Thus, it is possible to enjoy a free meal at McDonalds after a specified number of visits, or to get a free burger upon buying two. Customers need to avail themselves at a restaurant and present the bar codes for scanning. This programme serves better those who are not amenable to carrying loyalty cards every time they go out to enjoy a meal.
The other use of electronic reward system is through mobile phone payment applications. McDonalds has rolled out the programme in Texas, the USA. Through this mobile application, customers can pay and order for food and pick it at the closest destination. The company has programmed the application to record the cumulative points of each user. The more points one accumulates, the higher the rewards. Similarly, downloading the application on one’s smart phone earns points. the subsequent use of the application to order, pay, and give feedback accrues points that one can use to order a free eating item.
This programme targets consumers of coffee and other hot drinks, which originates from McDonald’s Canada affiliate. The programme encourages new guests to try out McDonalds’ coffee while thanking old customers at the same time. The programme uses loyalty cards that are equal to ATM cards in size. When customers buy, they remove the sticker from the coffee and stick it on the loyalty card. A high number of stickers lead to accumulation of more points. The card has spaces for seven stickers and the eighth one attracts a free beverage. McDonalds conduct advertisements on TV and radio using French and English to popularise the programme.
The Hawaii McDonalds’ affiliates have several loyalty programmes for their customers. The programme rewards customers who buy Big Macs with free food. More than 80 McDonalds restaurants have embraced the Big Mac loyalty programme. Customers only need to register their personal details to enroll for the loyalty programme. Payne and Frow (2005) explain that some customers are hesitant to give personal data but those who have given it have reaped benefits. Notably, McDonalds organises rewards that coincide with the customers’ birthdays and anniversaries. This makes customers feel a sense of attachment to the company, something that builds trust and loyalty. Accumulation of ten points entitles a customer to a free beverage drink. Lagrosen and Lagrosen (2003) explain further that “twenty five points equal to free French fries or hash browns, thirty five points a classic sandwich and a deluxe sandwich for fifty points” (p.379). Lucky customers who accumulate substantial points can win trips to exquisite destinations. All they have to do is advertise for the company.
In Japan, McDonalds is employing high technology in its customer loyalty programme. The company uses Tokusuru Keitai, a smart phone application, to record the most loyal and frequent customers. Downloading this application entitles customers to a virtual membership. The application generates a membership card. A customer needs to walk into a McDonald restaurant and swipe the phone under a machine. This machine has a reader that registers the number of times the customer has checked into a restaurant. More check-ins attract an elevation to a higher level. Higher levels guarantee access to promotions that low check-ins cannot access. The exquisite member-exclusive status confers a liberty to the customer to choose the type of promotion.
High level access unlocks the integrated coupons, which give regular shoppers the freedom to redeem and get higher prizes. Coupons also lead to conferment with badges that translates to even higher promotion. This policy of customer loyalty programme achieves “gamification”. Lagrosen and Lagrosen (2003) explain that the marketing strategy by McDonalds in Japan achieves “three tenets of gamification: motivation, visibility, and reward” (p.380). This model provides a great example of how companies can use loyalty programmes to cement customers’ loyalty and contribute to achievement of organisational goals.
Payne and Frow (2005) argue that a successful loyalty programme should lead to customers’ behavioral change. McDonalds loyalty programmes have a higher appeal than other companies. Thomas and Earl (1995) define loyalty as “un-abiding trust-being faithful even when it is contrary to your own benefits” (p.14). Moreover, loyalty cards make it impossible for customers to go and shop from competitors. McDonalds loyalty programmes come with add-on sale hence difficult to ignore. In Canada, for instance, add-on sales are in French and English. The company runs its adverts on many platforms making the customers remember to carry loyalty cards or swipe their mobile applications.
Costing reward scheme is the biggest challenge to applying loyalty cards. Some companies suffer losses for running loyalty programmes that do not pay back. Payne and Frow (2005, p.174) offer five tips for using loyalty schemes. Companies must satisfy value of reward cards that customers are to redeem. Secondly, companies must assess the cost of stickers or mobile applications against the expected benefits. Third, companies must make sure that items that attract rewards are taken together with a compliment, which will cover some part of the cost. Fourth, the company should estimate the value that a customer’s frequent visit will accrue. Fifth, it should calculate the cumulative benefits of the reward scheme, for instance, in a year. More importantly, a company should invest in soliciting feedback from customers so that it is at a better position to adapt to the customers’ changing needs.
The business environment is very competitive and companies have to be dynamic and responsive to customers’ needs. The clients’ relationship management is an important component of growth that no company can afford to ignore. This paper has reviewed some of the benefits of a long-term relationship between companies and customers. Through McDonalds, it is evident that long-term relationships breed loyalty from consumers. Additionally, it makes communication between companies and customers easily. The latter feel free to give feedback in a manner that does not tarnish a company’s reputation. However, long-term relationship may make a company complacent and lock it out from new clients. McDonalds can enhance relationship with customers by training employees on customer service and embracing technology. The paper has also investigated McDonalds loyalty programmes. Through smart phone application and stickers, the company has managed to reward loyal customers in a manner that inspires trust and drives the firm’s growth. Finally, the McDonalds Corporation should continue with sustainable rewards that inspire customers’ trust and confidence.
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